Question

The lemons model predicts that the market price of high-quality used cars will be ______ the true value of high-quality used cars, so that only relatively ______ cars will be put up for sale in market. greater than; high-quality less than; high-quality greater than; low-quality less than; low-quality

Answer 1

The correct answer is B) less than; high-quality.

The lemons model predicts that the market price of high-quality used cars will be less than the true value of high-quality used cars so that only relatively high-quality cars will be put up for sale in the market.

The Lemons Model refers to the value of some investments and the issues that could follow because the seller and the buyer could have different information regarding the deal. This model was developed by California at Berkley Professor George A. Akerlof, a renowned economist in the 1960s. "Lemons" was a word used in his research because it is how defective used cars are known.

Answer 2

Answer:

The correct answer to fill the gaps are " less than; high-quality."

Explanation:

Explanation:

A paper called "The Market for Lemon" was written by an economist called George Akerlof in the year 1970.

He examined the quality of goods sold in the market by using a used car as an example. He called the good used cars "peaches" and the faulty used cars "lemons".

He went further to write that owners of good used cars can not easily place them for sell unlike those that owned faulty used cars. From his prediction, the market price of high quality used car is less than the value of the used car,  making only relatively high quality used car to be put up for sale.